FDI In Retail - SC upholds Centre's policy

Today, 1-May-2013, SC has announced its decision upholding Centre's policy to permit 51% FDI in multi-brand retail sector and dismissed the petition challenging the FDI policy.

Who is for multi-brand retail?

• Big multi-brand retail players from around the globe have been eyeing the huge, lucrative potential in retail in India.
• The Government of India has been wanting to open the doors for the multi-brand retail to the multinationals. Centre has its eyes on the huge foreign exchange that is expected to flow in. 

Who is against multi-brand retail?

• The existing retail market players - especially the small mom-n-pop stores spread across the nation.
• The opposition parties.

Critics have been alleging that the advent of large multi-brand retail stores will be a huge setback to the mom-n-pop stores of India. A few decades ago, when there were not enough jobs for the citizens, the Government of India had promoted self-employment in a large way and given birth to so many small retail outlets across the length and breadth of the country - small shops managed by the family hence also referred to as the mom-n-pop stores.

Critics have feared that these small independent shops will not be able to cope up with the resources and financial power of the huge multinational multi-brand retailers and may be forced to close down - leading to large scale joblessness.

Brushing aside all these worries, in September 2012, the Government announced that it would allow FDI in multi-brand retail in India and this decision was subsequently ratified in the parliament in December 2012. Today on 1st May 2013, the Supreme Court has quashed the petition against FDI in multi-brand retail.

One Step More for FDI in Retail

FDI in Retail, an issue that has been center-stage in Indian politics for some time now. The government has been trying hard to see it through, even though not many are in its favor.

On Wednesday (05-Dec-2012), Lok Sabha voted on the matter and the saw it sail through. The nation witnessed discussions in which even allies of the ruling UPA coalition strongly spoke against it, but when it came down to actual voting members of Mulayam's Samajwadi Party (SP) and Mayawati's Bahujan Samajwadi Party (BSP) walked out.

The walkout by these two parties was a clear helping hand to the government which would have otherwise certainly been humiliated. Also, it was apparent that the walk-out was more political that topical.

Now, the next step and most probably the last big hurdle for this government would be getting it through in the Rajya Sabha.

FDI in Retail Sector

The way things have turned out on 27-Nov-2012, it seems that the ruling UPA government may finally get the numbers it requires to see its decision on FDI in Retail go through.

One of the allies of the UPA government party, the DMK has announced said that although it does not endorse the idea of FDI in retail it will vote with the government if the need so arises on this issue.

This announcement has changed the entire mood on the issue. A hot issue that seemed to be ready to embarrass the government has suddenly fizzled out. Following the DMK's announcement even the government has conceded to allow discussion in parliament under section 184, which allows for voting.

The stock markets also read positively into this development and stocks related to the retail sector jumped impressively.

What will be the fate of FDI in retail in India?

Today, Winter Session of the Parliament has begun and alonwith with it the final countdown has also started for the fate of the UPA government's bold decision to permit FDI in retail in India.

During the last few weeks, even the parties that supporting the UPA government - either from inside or from outside - have on several occasions voiced their dissent to the government's decision to allow FDI in the retail sector.
The Manmohan Singh led government has been trying at all steps to build consensus over the issue, but as it seems it has not been very successful. An apparently scared government has accepted to a discussion in parliament without voting on FDI.

This Winter Session is going to decide not only the fate of the FDI policy of the UPA government but also the every existence of the government. Mamta Banerjee's Trinamool Congress has already moved a no-confidence motion in the parliament.

Update:

Mamta's Trinamool Congress did call for a no-confidence motion, but it was not allowed because the party could not muster the required numbers.

Time for mom-n-pop stores to get their act together

One thing is clear, the big boys of retail from the west, like WalMart and other similar players. are going to set shop in India.

These big guys have all the resources required to motivate the governments to act in their favor. They are big, they are organized and most of all they see great potential setting up shop in India.

I am finally convinced that all the parties opposing FDI may at the most delay it for some more time, but they cannot and will not be able do much to stop it. In fact, the ruling coalition government at the center has given the green signal to FDI in multi-brand retail. It has taken a firm step and has shown a strong political will in announcing this decision.

So what next?

I think it is time for the local mom-n-pop stores to get their act together. They are faced with a huge challenge of combating competition from these big boys.

The first thing to do is take a deep breath and evaluate the situation. Do a SWOT analysis. Understand the strength, weakness, opportunity and threat faced by both parties, i.e. the small stores and the big guys.

Everyone needs to seriously get to work and start getting the act together. This means that they will have to reorganize their stores to create an atmosphere worthy of their customers. In the current regime, almost all these mom-n-pop stores have a very similar look and feel. Some have started already upgrading but they still have a long way to go.

The biggest thing in favor of the mom-n-dad stores is the direct one-to-one relationship that they have with their customers. This needs to be further consolidated. It must be strengthened with campaigns and strategies that will encourage and reward customer loyalty.

• computerization, 
• reorganizing displays, 
• incentives and discounts for loyalty
• air-conditioning - if possilbe

are some ways of ensuring that there customer base remains secure.

FDI in Retail - Will the decision last?

The Union Cabinet of India, under the leadership of Dr. Manmohan Singh, finally took the plunge. It has announced that FDI in retails will be allowed - with some riders.

The government which has been going through a decision crisis for more than a year finally appears to have found its spine. It has taken a decision - I am not challenging whether it is good or bad - and is sticking to it.

After a long time it seems that the government is seriously working to shed its roll-back image.

Well the immediate impact of this decision...

Commercial

1. The stock markets have given a thumbs up to the decision and the markets have started heading north since the day this decision was announced.

Political

1. The 2nd largest coalition partner of the UPA - the Trinamool Congress - has withdrawn its support to the government.
2. DMK - another coalition partner of the UPA - has announced that it will vote against the government's decision on the issue of FDI in retail
3. Though they have not said anything conclusive on the issue, the stance of Mulayam Singh and Mayawati on the matter has been anti-government.
4. BJP - the largest opposition party of India - has also announced that it does not support the decision on FDI on retail.

Now, one can only wait and watch how things go on from here. One thing is sure the government is in for very rough time in the Parliament the next time it convenes.

FDI put on hold!!

It appears that the Union Cabinet has put the decision of FDI in retail on hold, for now i.e. the MNCs like Wal Mart will have to wait a little longer before being able to set store in this India.

The Government of India which is currently a coalition government is once again on the backfoot. It has once again had to roll back a decision taken by the its biggest coalition member - the Congress Party. This was conveyed to the media by Ms. Mamta Banerjee, the supremo of the Trinamool Congress.

She said

"Pranabda sought our opinion on the issue and we told him that the Trinamool Congress remains firm. He informed me that the cabinet decision on FDI entry in retail will be suspended until and unless a consensus is evolved"

The government has had to face the ire of the people and a very stiff resistance from the opposition parties. Even some of its allies, including the Trinamool Congress, were against it on issue of FDI.


The traders in the country had called for a nation-wide one-day bandh on the 1st of December, a call that had received overwhelming support from traders across the length and breadth of the country.

All-in-all, the end result is that the government has finally given in to the public demand and put FDI in retail on hold.

FDI Decision faces lot of resistance.

The government's decision to allow FDI in the retail sector is facing a lot of resistance. The resistance is from almost all quarters.

Parliament has not being able to do business since the decision of the union cabinet went public. The opposition  - NDA and the Left Front - are going all out against this decision. Some opposition have gone ahead and said that they will go to the extent of violence against the retail outlets that come up in accordance to this decision.

So much so that, some of the alliance partner of the ruling coalition - members of  UPA - have also voiced their opinion against the FDI decision.

A nation-wide bandh call has been given for the tomorrow - 1st Dec 2011 - on this issue.

Let us see what happens.

What FDI in Multi-Brand Retail means to Indians?

A lot is being floated in the media - both good and bad - about the Indian Governments recent decision to allow up to 51% FDI in multi -brand retail.

But, what does it really mean for us Indians?

Multi-Brand Retail basic is a fancy name for big shopping plazas or malls, products from different manufacturers will be available for sale under one roof. Malls are the latest in fad in the economic scenario. Big Bazar, Magneto, City, Reliance Retail are some names that are already doing business in India. These the big players that chains of stores in several cities.

Every city also has some individual names that are available locally.

So, what is the fuss all these players are already doing business in India. Well - the government just opened the Indian shores for foreign players to come and set shop in India. Wal-Mart has already partnered with Bharti  and has already started building its wholesale distribution outlets in several cities.

With the Cabinet having decided in favour of FDI in retail being, Wal-Mart and other similar retail outlets are likely to come-up across the country soon, if the government does not bow down to the pressure from the opposition parties and local small shop-owners.

Government of India to allow FDI in retail

Union Cabinet - today - approved 51% FDI in multi-brand retail sector.

Way back in 2008, the government had put a hold on FDI in multi-brand retail, after there were wide spread protests against the large scale organized players entering the retail sector. The retail sector in India is currently dominated by the many small shops that can be seen in every neighborhood.

Way back in the 70s and 80s, the government under the stewardship of the then Prime Minister Indira Gandhi had given a lot of emphasis to self-employment and encouraged the Indian masses to setup their own enterprises. As a result, a large number of small shops that are now referred to as the mom-n-pop stores came up.

The advent of the large-scale players in the form of organized retail made these small entrepreneurs insecure, leading to large scale protests against them.

But now, the government has cleared the way for setting up large scale multi-brand retail outlets by allowing 51% FDI.

Let us see what happens, now.

GOI's discussion paper for FDI in retail sector

The Government of India has set the ball rolling for Foreign Direct Investment (FDI) in the multi-brand retail sector by releasing a discussion paper. Organized players who have been eying a larger share in Indian retail are once again buzzing with activity.

The discussion paper was issued in the first week of July 2010 by the Ministry of Commerce and Industry.

Earlier, the large players for multi-brand retail outlets had to roll-back or put their projects on hold after the government had intervened following large scale protests from the unorganized sector.

Presently, 51% FDI is allowed in only single brand retail outlets in India and multi-brand retail is restricted to cash and carry format.

The retail sector in India is mainly dominated by the family owned shops - also referred to as the mom-n-pop stores.

The scope of Consumer Protection Act

The scope of the Consumer Protection Act got wider on Friday when a Division Bench said "buyers of goods or commodities for ‘self consumption’ in economic activities in which they are engaged would be consumers as defined in the Act (Consumer Protection Act, 1986)”.

The observation was made by the Division Bench of Justice S. B. Sinha and Justice Deepak Verma while hearing a case in which the heir of a purchaser of a truck had approached the country's top court with a claim for damages due to delayed delivery of the necessary documents of the truck, which had been purchased at an auction after its previous owner defaulted in paying its installments.

The court observed that while enacting the provision of the Act, Parliament wanted to exclude from the scope of the definition (of consumer) the persons who obtain goods for resale and also those who purchase goods with a view to use them for carrying on any activity for earning.

Unwinding of the retail onslaught

In the wake of the on-going financial crisis one business venture that is continuing to stand out is the traditional retailer of the neighbourhood. Large retail establishments have not been able to dent their existence in any way whatsoever.

The traditional neighbourhood retails stores seem to have won this round of threat to their existence from branded and large scale retail operations. Expansions plans of all malls that were mushrooming all over the country have scrapped or postponed indefinitely.

In fact, the condition of many of the existing malls atleast in the smaller cities of the country is not very good. In fact, some have downed their shutters while many are in the process of downsizing.

Retail onslaught - my comments

When I started this blog sometime back, I just wanted to document some of my experiences based on my interaction with the members of the marketing and trading community in our town.


Little did I know that I would end up documenting protests against the retail onslaught at a national level.

Never did I imagine in my wildest thoughts that there would be such large scale protests in the country against the big players as a result of which a giant of the size and stature of Reliance would have to shut down its outlefts and consider withdrawal from some of the states.

We are at a stage where government intervention is desirable so that all parties involved survive and thrive.

Protest by Retailers in Maharashtra at Mumbai

Today (10-October-2007), representatives from all sections of the supply chain including farmers, traders, wholesalers, hawkers and daily wage workers from areas around Mumbai gathered at Azad Maidan in Mumbai to protest the decision of the government to allow FDI in retail ventures by overseas and big domestic businesses.

Most establishments, including wholesale markets and retail shops across Mumbai, the financial capital of the country, and its suburbs were closed. The protest was organized under the banner of Federation of Associations of Maharashtra (FAM) who had given a voluntary trade shutdown across the state.

Click here for details of the protest.

Indian Druggist Association launches marketing arm to keep off competition

The All India Druggists and Chemists Association has launched a marketing company in which many of its members have joined as shareholders.

The move was initiated by the top brass of the association to head-off multinational pharmaceutical marketing companies that have been trying to enter the Indian arena on a large scale.

In these competitive times activities of the large corporates are being fine tuned to harness their strengths, the weaknesses are being either off-loaded or out-sourced. Specialized marketing outfits have been reported to be approaching the Indian pharmaceutical manufacturers to take onus of marketing their products at all levels - distribution to retail.

When the office bearers of the national association learnt of the forthcoming threat to their existing work culture the initial reaction was to not allow such marketing companies to start operations in the country.

After subsequent deliberations and discussions is was accepted that such invasions by marketing outfits could only be delayed and not completely stopped. So instead of beating the competition they decided to join them.

As a result the association has floated a limited company and invited applications for promotional shares from its members.

This I believe is a novel way of surviving the retail onslaught that is making inroads in the country.

Organized Retail and Uttar Pradesh

Organized retail in Uttar Pradesh witnessed a setback as Reliance has to close its Fresh outlets in Lucknow, Ghaziabad and Noida.

The retailing giant - Reliance Retail - has announced the termination of services of about 850 odd employees and has hinted at winding up operations in the state.

One of its top executives was quoted to have said something to the effect that there was no sense in staying invested if they are not allowed to open the stores.

One strange phenomenon that I have witnessed in the entire episode is that a major chunk of the protests against the organized retail has been targetted at Reliance Retail and its outlets.

Rough Weather for Organized Retail continues

The latest salvo at the organized retail has come from the fire-brand leader Uma Bharti of MP.

She led hundreds of supporters in protest against the proliferation of retail chains promoted by corporates in the country. The immediate target of their attack was the Reliance Fresh store at Indore. They forced the outleft of Reliance Retail to shutdown.

The company representatives had already closed the shop before the rally reached its doorsteps. Uma Bharti still put a lock on its entrance to formalize the shutting of the shop.

The leader of the Bhartiya Janshakti Party - Uma Bharti - has set a 2 week deadline for Reliance Retail to close all its retail outlets in Bhopal and Indore threatening the organization with dire consequenses. She has also warned Walmart to refrain from advancing its plans of opening a chain of retail stores.

After UP, West Bengal, Kerala - a political leader in MP has stood up against the corporate and multinational organized retail players.

The voices from the small traders - owners of the stores in the unorganized retail arena of the country - have started getting support from some political leaders.

Reliance Retail closes shops in West Bengal

Reliance Retail has announced the temporary closure of it retail outlets in the state of West Bengal.

The decision has come close on the heals of the decision of the Mayawati government in Uttar Pradesh to forcing all players in the organized retail arena to down their shutters.

Both the above decision have been support with the same reason.

In both cases the decision makers have submitted to the protests and angry demonstrations by the local traders and business community which have been led by the people's representatives. Many a times, these demonstrations have generally been followed by violence and destruction.

For many years, the policy makers of our country have gone to great lengths to promote a culture of self employment through setting up small stores - retail outlets - which are now referred to as the mom-and-dad stores by the players of the organized sector.

The announcements made by the organized retail players as they publicized their plans to launch a series of stores and malls across the country has spread a wave of uncertainity amongst the owners of these mom-and-dad storeowners, who feel their livelihood is being threatened.

Mayawati Bans Retail Outlets of Organized Sector

It is for the first time that has taken a political decision against the outlets of retail sector players.

Mayawati, the firebrand Chief Minister of Uttar Pradesh, has ordered the closure of all retail outlets in the category of organized retail in the state. These include shops of Reliance Fresh which has functional outlets in Lucknow with other stores coming up in Varanasi and other places in the state.

The leader of the Uttar Pradesh government issued the closure orders citing the law and order situation in the state as the reason. A group of local shop keepers led by a member of parliament of the opposition Samajwadi Party ransacked some outlets in Lucknow. There have been reports of protests against the up coming stores in the other cities also.

The CM has said that the ban of these retail outlets is a temporary one and will continue until the law and order situation does not improve.

Meanwhile, she has announced the constitution of an 5 expert committee under the chairmanship of the Cabinet Secretary of UP. The committee comprises of Principal Secretaries from different departments. The committee has been asked to go into all aspects of the organized retailing and the effect that it can have on the tradition mom-n-pop stores in the state.